Archive for September, 2010

Kaesong day care center opened, minimum wage raised

Tuesday, September 7th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-09-07-1
9/7/2010

Construction on a day-care center for the children of North Korean workers in the Kaesong Industrial Complex (KIC) has been completed, and the center was opened on September 1. The ROK Ministry of Unification released a statement announcing that “a child-care center has been built with the aim of providing care for the children of North Korean female laborers in the KIC and to improve productivity of the industries in the complex.” With the opening of the new center, more than 300 additional children can be cared for, along with the more than 200 children that are currently attending day-care in the complex.

Ground broke on the new facility, with over 3,100 square meters of floorspace, on September 24, 2009, and it took over a year to complete. The real estate was provided by the North, with the South-North Cooperation Fund providing 900 million won for the build. The Kaesong Industrial District Management Committee has turned over the management of the center to the North, and factories in the complex pay approximately fifteen dollars per child per month to send employees’ children to day-care.

In addition, the Kaesong Industrial District Management Committee and the North Korean Central Special Zone Development Guidance General Bureau agreed on August 5 to raise the minimum wage of North Korean workers in the complex by five percent, from 57.881 USD/month to 60.775 USD/month. The raise took effect on August 1 and will need to be reevaluated before July 31, 2011.

Along with the five percent raise in the minimum wage, South Korean companies will gain more control over the hiring process. North and South Korean authorities agreed to strengthen adherence to existing regulations, both on hiring and assigning workers to various positions. Previously, North Korean labor representatives could control work assignments for North Korean workers, but that will be falling under the authority of managers of each business.

According to the guidelines regulating the KIC, North Korean workers will receive a raise of no more than five percent per year, and they have received a five percent raise each year since 2007. North and South have now agreed to continue raises at a rate palatable to businesses in the complex, and to allow South Korean businesses more control over employees.

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Taiwan firm raided after DPRK sale

Tuesday, September 7th, 2010

According to the Associated Press:

Taiwanese investigators raided a local company after it shipped banned machinery to North Korea via a Chinese firm with ties to Pyongyang’s military, a Taiwanese official said Tuesday.

The owner of the Taiwanese company, Ho Li Enterprises, said that two computer-controlled machine tools used in the manufacture of engines were shipped to North Korea earlier this year, but said he was unaware he had broken the law. Huang Ting-chou said that his company’s premises were raided in July by Taiwanese law enforcement officials acting on a tip from the U.S. government.

A Taiwanese law enforcement official confirmed the shipment and raid had taken place but did not discuss U.S. involvement. The de facto American Embassy in Taiwan declined to comment on the claim.

The raid took place as the Obama administration was working on a new set of sanctions against North Korea that were unveiled last month, targeting the assets of individuals, companies and organizations allegedly linked to support for its nuclear program.

North Korea has repeatedly tried to circumvent international strictures designed to stymie its production of missiles and nuclear material and other weapons of mass destruction.

Taiwanese companies are no strangers to sanction-busting attempts. In early 2009, Shanghai’s Roc-Master Manufacture & Supply Company ordered pressure gauges with possible nuclear weapons applications from Taiwan’s Heli-Ocean Technology Co. Ltd. Using backdated purchase orders, the Chinese company had Heli-Ocean ship them to Iran. The transaction violated international sanctions on exporting sensitive equipment to Tehran, which many in the international community suspect is trying to make nuclear weapons.

In an interview with The Associated Press, Huang said the machine tools were originally ordered “more than a year ago” but were shipped only after Ho Li’s Chinese client, Dandong Fang Lian Trading Co. Ltd. in northeastern China’s Liaoning province, was able to pay for them. While acknowledging that the tools ended up in North Korea, he said he had no idea how they would be used or why they would appear on any list of sanctioned items.

The North Korean machine tool deal was first reported Tuesday in Taiwan’s Liberty Times newspaper.

A Taiwanese official, speaking on condition of anonymity because he is not authorized to deal with the press, said that the machine tool shipment violated international sanctions and Taiwanese trade laws. He did not identify the items in question or specify why they violated sanctions.

The official works for the Taipei branch of the Ministry of Justice’s Investigation Bureau — roughly equivalent to the Federal Bureau of Investigation in the United States.

He said that Dandong Fang Lian is managed by a North Korean national with an unspecified connection to the North Korean military, and that the machine tools had ended up in the country’s Sinuiju region, across the Yalu River from Dandong. Sinuiju is the funnel for most Chinese goods entering North Korea.

“Ho Li sold two machine tools … without reporting to the authorities that the equipment was really going to North Korea,” the official said. “We became aware of the violation and when we raided Ho Li in late July we found e-mails and money transfer documents to prove our case.”

Huang said that Dandong Fang Lian specializes in diesel engines and power generators, and that while he had done business with the company before, this was his first venture with them in the machine tool sector.

“I am cooperating with the government in its investigations,” he said.

Neither Ho Li nor Dandong Fang Lian appears on an American list of sanctioned companies.

The Taiwanese official declined to confirm Huang’s assertion that an American tip led to the raid on Ho Li’s premises. The American Institute in Taiwan — the de facto U.S. Embassy on the island — said it would not comment on specific cases but emphasized it cooperates closely with the island on enforcing export controls and stemming the proliferation of weapons of mass destruction.

Read the full story here:
Taiwan firm raided after illicit sale to NKorea
Associated Press
Debby Wu
9/7/2010

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US dollar popular on DPRK black market

Tuesday, September 7th, 2010

According to the Daily NK:

An inside source reports that popular dependence on foreign currencies for trading continues in spite of last year’s currency redenomination, to the extent that market traders are openly setting separate prices in U.S. dollars or Yuan alongside the depreciating North Korean won.

The inside source from Pyongyang explained to The Daily NK on September 5th, “In recent market trading, usage of dollars has increased rapidly, and now market prices are being set according to a dollar standard. Even when money is loaned and repaid, the amount for repayment is decided based on the dollar standard.”

As of September 2nd, the exchange rate in Pyongyang was around 150,000 won to $100, as North Korean people refer to it. Loans made in North Korean won are always calculated according to the value of the dollar, and the value of the loan fluctuates accordingly.

The source added, “Recently, market merchants have been setting separate Yuan or dollar prices, except for on rice, corn, and ingredients for side-dishes. The fabric stalls in Sunkyo market in Pyongyang put up all their prices in dollars.”

“Especially in the case of wholesalers,” he added, “they are all trading in dollars or Yuan. They depend on foreign currency since the value of the North Korean currency has fallen so badly and also because there is a lack of large-denomination bills.”

Since 2000, Yuan has been in common use alongside the North Korean currency in border regions. The popularity of dollars is higher in Pyongyang and North and South Hwanghae Provinces. Especially in cases where the unit price of the item is high, such as for home appliances or industrial products, most are dealt with in dollars or Yuan.

However, this is also now spreading to lower value consumer goods like shoes and clothing. Dollar and Yuan prices are applied to such items even when the seller is not a foreign currency store or international hotel.

Despite the fact that the North Korean currency was redenominated at a rate of 100:1 on November 30th, 2009, the monetary authorities have not been able to break North Korea’s inflationary cycle. Currently, rice in North Korean markets goes for around 900 won per kilo, which is only around half the 2,000 won it cost prior to the redenomination, far from the approximately 20 won it would cost in a more stable economy.

The source explained, “The value of the won is unstable, making foreign currency exchange rates more volatile. So merchants are selling products at higher prices than normal to compensate for their losses. This phenomenon is creating in them the mentality of raising their product prices.”

He also emphasized, “Prices for all products imported from China are set in dollars or Yuan. Considering the fact more than 90% of products in the North Korean market come from China, it looks like a world in which the North Korean currency is useless is coming.”

The source added, “Since Yuan are used quite commonly in North Hamkyung Province, Yangkang Province, and Shinuiju, a phrase, ‘This is Chinese land!’ is spreading. At the same time, since the dollar is used a lot in Pyongyang, Sariwon, Haeju, and Wonsan, another joke suggesting that ‘here is U.S. soil!’ is going around as well.”

IFES also covered this story:

With last November’s currency reform, North Korea’s dependence on foreign currency has increased to the point that market prices today are determined in terms of dollars or yuan.

According to Daily NK’s internal sources in Pyongyang, a recent surge in the use of dollars in market transactions has meant that market prices of goods are now determined based on dollars. Moreover, it has been revealed that individuals lending and borrowing money from one another collect and pay the interest in dollars.

As of September 2, the exchange rate in Pyongyang was about 100 US dollars to 150,000 won. If someone was to borrow 150,000 North Korean won from a friend, he would later have to repay that loan in however much North Korean won is equivalent to 100 US dollars at the time.

The source said, “These days, the merchants in the market charge everything in yuan and dollars, except for rice, corn or side dishes,” and, “Clothing stores in Pyongyang’s Seonkyo Market have actually put up signs indicating prices in dollars.”

The source added, “Wholesale merchants, especially, do all of their business in dollars or yuan now,” and “The value of North Korean money has fallen, and there are no more large bills anymore, so everyone is dependent on foreign currency.”

After 2000, the yuan and the North Korean won were both came into common use in the border area between North Korea and China, while the dollar became popular in Pyongyang and Hwanghae Province. Expensive items, such as electric home appliance or industrial goods, were more often than not bought and sold in terms of dollars or yuan, bypassing North Korean currency altogether.

However, recent trends show that the use of dollars and yuan has spread to the sale of shoes, clothes, and other everyday consumer goods. Stores put up signs indicating prices in dollars and yuan, once done exclusively by currency exchange shops or hotel restaurants frequented by foreigners.

Last year, North Korea depreciated its currency at a rate of 1:100 in an attempt to reform its currency, but the efforts to control inflation throughout the country failed. The price of rice in North Korean markets today is about 900 won per kilogram, about half the price it was before currency reform (about 2000 won per kilogram).
The source explained, “Because the value of the won is unstable, the exchange rate varies wildly. In order to not lose money, merchants have been fixing their prices higher than normal.”

The source emphasized, “Goods from China are all sold in dollars or yuan,” and “Considering that over 90% of the commodities circulating in the markets today are from China, it appears that North Korean money will be rendered useless in the near future.”

“In North Hamkyeong Province, Yangkang Province, and Sinuiju, where the yuan is often used, they say ‘This is Chinese land,’ and in Pyongyang, Sariwon, Haeju, and Wonsan, where the dollar is often used, they joke, ‘This is American land,’” added the [sic].

Read the full stories here:
North Korea’s Fiscal Sovereignty Collapsing
Daily NK
Park In-ho
9/6/2010

North Korea’s dependence on foreign currency increases
Institute for Far Eastern Studies
NK Brief No.10-09-07-2
9/7/2010

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DPRK software exports

Monday, September 6th, 2010

According to Bloomberg:

North Korean leader Kim Jong Il has found an unlikely ally to help raise cash for his impoverished regime: The Dude, the pot-smoking underachiever played by Jeff Bridges in the movie “The Big Lebowski.”

Programmers from North Korea’s General Federation of Science and Technology developed a 2007 mobile-phone bowling game based on the 1998 film, as well as “Men in Black: Alien Assault,” according to two executives at Nosotek Joint Venture Company, which markets software from North Korea for foreign clients. Both games were published by a unit of News Corp., the New York-based media company, a spokeswoman for the unit said.

They represent a growing software industry championed by Kim that is boosting the economy of one of the poorest countries in the world and raising the technological skills of workers. Contracting with North Korean companies is legal under United Nations sanctions unless they are linked to the arms trade.

“From the government’s point of view, foreign currency is the main reason to nurture and support these activities,” said Andrei Lankov, an academic specializing in North Korea at Seoul- based Kookmin University. “These activities help to fund the regime, but at the same time they bring knowledge of the outside world to people who could effect change.”

The technological education of graduates from North Korean universities has “become significantly better,” Volker Eloesser, a founder of Pyongyang-based Nosotek, said in an e- mail. Companies with “hundreds or even thousands of staff each” operate in North Korea, he said.

Double-Edged Sword

Better trained programmers may also bolster the regime’s cyberwarfare capabilities, said Kim Heung Kwang, who taught computer science at universities in the north for 19 years before defecting to South Korea in 2004. South Korea’s presidential office said July 28 the nation had received intelligence that North Korea may plan an Internet-based attack.

Won Sei Hoon, director of South Korea’s National Intelligence Service, told lawmakers last October that North Korea’s postal ministry was responsible for cyber attacks in July 2009 on dozens of websites in South Korea and the U.S.

President Barack Obama widened U.S. financial sanctions on North Korea on Aug. 30, freezing assets of North Korean officials, companies and government agencies suspected of “illicit and deceptive activities” that support the regime’s weapons industry.

Seeking Capability

“Any sort of transaction that gives cash to the North Korean government works against U.S. policy,” said James Lewis, a senior fellow at the Center for Strategic and International Studies, a Washington-based policy group. “The coding skills people would acquire in outsourcing activities could easily strengthen cyberwar cyber-espionage capabilities. Mobile devices are the new frontier of hacking.”

North Korea’s information technology push began in the 1980s as the government sought to bolster the faltering economy, said defector Kim. That drive also led to the creation of a cyber-military unit in the late 1990s, he said. He runs North Korea Intellectuals Solidarity, a group composed of defectors who have graduated from North Korean universities.

Nosotek’s Eloesser disputed any connection between programming for games and cyber-espionage.

“Who could train them, as neither me nor the Chinese engineers who are cooperating with the Koreans have those skills ourselves?” he asked in an e-mail. “Training them to do games can’t bring any harm.”

Joint Venture

Nosotek is a joint venture between the science and technology federation and foreign investors, company vice president Ju Jong Chol said in an e-mail. He said federation members developed both “Big Lebowski Bowling,” set in a rendition of the bowling alley where The Dude spent much of the movie drinking White Russians, and “Men in Black,” in which players battle invading aliens. Eloesser confirmed his comments.

Both games were published by Ojom GmbH, a unit of a company called Jamba that was bought by News Corp. and later renamed Fox Mobile, according to Fox Mobile spokeswoman Juliane Walther in Berlin. They came out after News Corp. took a controlling interest in Jamba in January 2007 and before it bought the remainder in October 2008. Ojom was eliminated in a May 2008 reorganization, Walther said.

When asked whether Fox Mobile distributes games developed in North Korea, Walther said that the unit “has extensive partnerships with content producers in all areas, with operators, and with the biggest media companies worldwide, including various Asian companies.”

No More Details

She said the company could not provide more details on where partners are based or confirm “if and how” North Korean companies were involved in development for Ojom. Dan Berger, a News Corp. spokesman in Los Angeles, declined to comment further. News Corp. is controlled by Chairman and Chief Executive Officer Rupert Murdoch, 79.

Eloesser founded Elocom Mobile Entertainment GmbH in 2003, which later became a subsidiary of Ojom. He said he first visited North Korea in 2005 and helped found Nosotek in 2007.

Nosotek offers clients billing through either a Hong Kong or Chinese company, according to its website, which promises “skills, secrecy, dedication.”

Such practices allow the funds to flow to North Korea, said Paul Tjia, director of Rotterdam, Netherlands-based GPI Consultancy, which helps companies outsource overseas, including to North Korea. Other companies contract with Chinese firms that then subcontract to North Korean companies, he said.

It is “impossible to estimate” how much revenue North Korea earns through software development, he said.

Nosotek’s wares are “of similar good quality to those from other companies in Europe or America,” according to Marc Busse, digital distribution manager at Potsdam, Germany-based Exozet Games GmbH, which has distributed games for Nosotek.

Foreign companies that are reluctant to do business in North Korea need to understand that investment there can help the country modernize and reduce its isolation, Tjia said.

“Most companies are still reluctant, which we think is unfortunate,” he said. North Koreans “need investment, like China in the 1970s.”

Read the full story here
Kim Jong Il Bowls for Murdoch’s Dollars With Korean Video Games
Bloomberg
Matthew Campbell and Bomi Lim
9/6/2010

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Lankov on the DPRK party conference

Monday, September 6th, 2010

Andrei Lankov writes in the Asia Times:

In the next few days, a large gathering of North Korean officials is expected to open in Pyongyang. This is an unusual event, to be sure, so it attracts much attention in the world media.

However, even a cursory glance at different publications demonstrates that many journalists and commentators who write on the issue do not quite realize what type of political gathering to expect. The function is variously described as a “meeting”, “convention”, or even as a “party congress”. The last description is wrong (the coming event is explicitly not a party congress) while the two others are far too nebulous. After all, the final match of the football World Cup could be described as a “meeting of 24 well-trained individuals for the purposes of physical exercise”. Factually true, but it does not tell us much about the nature of the event.

The misunderstanding can be easily explained by the changing spirit of the times. In the late 1940s, North Korea borrowed from the Soviet Union the basic structure of a communist state, and has kept it ever since.

Such states were once common, and in the 1970s the Western media would not be so clueless about the nature of such an event. However, nowadays, a Leninist state is a seriously endangered, almost extinct, species, so the younger generation of journalists is clearly at loss (nowadays, they probably are better informed about the specifics of various Muslim sects). Therefore, some background information is needed – if you like, a short memo on how North Korean state operates.

So, what is going to happen in Pyongyang soon? In the Korean Workers’ Party (KWP) statute the scheduled event is defined clearly: this is a “party conference”, a gathering of the (supposedly) elected representatives of KWP members where specific issues of current policy are discussed.

The KWP, like all Leninist parties, is a rigidly centralized structure, somewhat akin to a military organization. However, for some reason those parties kept a number of institutions that were designed to appear democratic. Those were largely vestiges of a long-gone era, a reminder of times when in the early 1900s communist parties – or rather their predecessors – indeed had a vibrant internal democracy. Since then, the ostensibly democratic features have been kept partially out of respect for established tradition, but largely for propaganda-cum-decorative purposes.

One of those pseudo-democratic fictions is the system of party elections. The party-state is run by a hierarchy of committees, with the central committee and its powerful bureaucracy being the pinnacle of the entire structure, a central government in everything but name.

The party committees at all levels are essentially self-appointed. Communist functionaries become members of the central committee pretty much in the same way as the Catholic clergy become cardinals – they are appointed by the current leaders, but not without consulting and lobbying at the lower levels. At any rate, no elections are involved. Lower-level committees are manned in a similar manner.

However, on paper the committees – including the central committee – are elected. In the Cold War era most communist parties once every few years staged a large and pompous convention that was known as a “party congress”. This was where the new central committee was “elected”.

Actually, the elections were a fiction, pure and simple. The congress obediently voted for a candidates’ list that had been drafted weeks or months beforehand by the central committee bureaucracy and approved by the leadership. The tradition required that support for the list during a public voting ritual should be unanimous, and this indeed was the case.

The party representatives who attended the congress – and they could number in thousands – were themselves selected through a similar procedure: appointed by the local party apparatchiks, they were then formally “elected” by the relevant party groups.

Some of the representatives were prominent bureaucrats and officials, but a majority came from the party rank-and-file. Exemplary milkmaids and steel workers were dispatched to the congress to demonstrate the broad support communist rule allegedly enjoyed among the ”masses”. Nobody expected from them any meaningful discussion of political issues, and in most cases any attempt at such discussion would be promptly suppressed.

A party congress had other important functions. It was the place where the party supreme leader, usually known as its “general secretary”, delivered a speech in which he described the achievements of the party as well as the universal love and admiration it enjoyed among the people.

He also used the opportunity to criticize scheming enemies and remind about the need to remain vigilant. These speeches could be very lengthy. For example, in 1956, Kim Il-sung, the founder of the North Korean state and father of present dictator Kim Jong-il, spent six hours reading a voluminous text of such speech, and during party congresses in the Soviet Union in the 1970s, Leonid Brezhnev, the top Soviet leader, usually spent three of four hours reading similar texts in his less then audible voice. Kremlinologists, however, unlike the unlucky audience, had a field day with these speeches since among the boring nonsense there were some important hints that could indicate the direction a particular state was going to take.

Indeed, the party congresses (and conferences, of which more later) were largely convened to convey important messages about policies while also staging an only too transparent show of ”party democracy”. It is important to remember that no discussion took place at a congress of a ruling Leninist party.

The decisions were drafted well before a conference/congress began, were always voted through unanimously and without addition or amendment. The speeches of the participants were also usually checked and censored beforehand, and in the entire history of the communist bloc there were very few cases when a representative making critical comments about the system or leaders. Usually, the representatives extolled party wisdom, the greatness of its leaders and struggled to describe how great and selfless their own love of the system was.

The party statute stipulated that a congress should be convened at regular intervals, usually once every five years. After the 1950s, most communist countries complied with this demand.

Party statutes also stipulated that a minor version of a congress could be convened if the party leadership considered it fit. The minor version was known as a party conference (and this is what is going to meet in Pyongyang). Officially, a party conference met to discuss peculiar questions of current policy, but in real life it was, essentially, a minor version of the party congress. Generally speaking, the conferences were much less common then congresses.

In the Kim Il-sung era, North Korea, however, was remarkable in its relative disregard for legal niceties. The KWP’s statute has all the necessary articles, copy-pasted from Soviet regulations, but these have been ignored.

Throughout its 65 years history, the KWP has had six congresses, but none of them ever met within the officially prescribed interval. The last KWP congress took place in 1980, and was the venue at which Kim Jong-il was officially and publicly proclaimed the successor to his father. The next congress was supposed to meet five years later. It has never met (and the coming convention will be not be a congress, but a humbler conference).

The KWP’s party conferences took place twice, in 1958 and 1966. Both times they were convened to formalize the results of severe purges in the top leadership and ”elect” new leaders, free from “unmasked anti-party enemies”. After a 30-year hiatus, most observers came to the conclusion that North Korean leaders had decided to get rid off the pseudo-democratic institution altogether.

The “military-first” policy and the obvious attempts to play down the KWP’s role also strengthened such understanding. It was known that even central committee meetings were discontinued, so after his father’s death in 1994, Kim Jong-il has run the country with a remarkable disregard to institutional formalities.

However, in recent few years it seems the trend has been reversed: the KWP or, rather, its bureaucracy or people who have made a career within the party, are beginning to reassert themselves, slightly pushing the military aside. Decisions to convene a conference – ostensibly to publicly anoint the next hereditary dictator – seem to be another sign of these quiet changes.

But why did the North Korean leaders choose to convene a conference that is clearly a lower-level, less formal and less prestigious gathering, and not a full-scale party congress? The reasons might be economic. In North Korea it has become an established tradition that a party congress should be accompanied by lavish celebrations and expensive gifts to both the elite and the general public.

In 1980, when the KWP congress was last convened, humble housewives were given fresh fruit, mid-level officials were handed wristwatches while their superiors could even get a Japanese-made refrigerator. This tradition was burdensome, and in the mid-1980s Kim Il-sung complained to Soviet diplomats that he would like to have another congress but could not afford it due to the poor economic conditions of the country. The conference, on the other hand, is not expected to be celebrated on such a lavish scale.

These economic considerations seem to be the reason why in Pyongyang we are going to see the third KWP conference, not the seventh KWP congress. Nonetheless, in practical terms, the difference between those two events are negligible.

Whatever the name, what should we expect? No policy debate will take place, for sure. The participants, overwhelmingly, but not exclusively, will be men in their 40s, 50s and 60s, clad in badly tailored suits, who will unanimously vote for all resolutions, showing outbursts of enthusiasm when instructed to do so. There will be some important statements, most likely related to the succession – otherwise, it would not make sense to convene the conference. Those statements will move the representatives to tears – if earlier North Korean propaganda is a clue, we are likely to see an entire hall of weeping functionaries.

A lengthy speech about the current situation will be delivered. In all probability it will not be done by Kim Jong-il, who seldom speaks in public, but by some other dignitary (the name might be important, since the person is likely to play a major role in the years ahead). The speech will be worth careful reading since it will have some important hints on the country’s course. Equally important for political analysts will be the lengthy lists of newly appointed officials.

At any rate, it will be a bit of a show. The world has not seen anything like this for years – China and Vietnam still hold similar gatherings, but their functions have lost much of their earlier flavor. So, the conference itself is a slightly bizarre reminder of a bygone era, and it is not impossible that it will become one of the last gatherings of this type to take place in front of an international audience.

Read the full story here:
North Korea blows off the cobwebs
Asia Times
Andrei Lankov
9/8/2010

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DPRK-PRC promote business in border area

Monday, September 6th, 2010

According to the Choson Ilbo:

North Korea and China are already starting economic cooperation projects in the border area across China’s northeast and the North’s Rajin-Sonbong region.

The Chinese Ministry of Transport recently designated Jilin Province as a pilot region for international trade and logistics encompassing the three northeastern provinces of China and the Duman (or Tumen) River area, the China Shipping Gazette reported last Friday.

The decision is aimed at facilitating transport of goods from China’s northeast to Shanghai and the south via customs points in the Chinese city of Hunchun and the North’s Rajin-Sonbong Port, the weekly added.

A representative of the Yanbian Korean Autonomous Prefecture in Jilin also signed an agreement on bilateral economic cooperation with Kim Su-yol, the chairman of the Rajin-Sonbong special city people’s committee, at the sixth Northeast Asia Trade Expo in Changchun last Thursday.

Read the full story here:
N.Korea, China Promote Business in Border Area\
Choson Ilbo
9/6/2010

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Recent fees and taxes in the DPRK

Monday, September 6th, 2010

According to the Daily NK:

North Korea is a “Tax-free country,” according to one of its many propaganda slogans, but this is contradicted by defector testimony, which suggests that residents carry a very heavy burden. According to defectors leaving the country after the North’s currency redenomination, North Korean people pay at least 20 to 30 percent of their monthly living expenses in the form of quasi-taxes to the state.

Since the redenomination, the minimum cost of living for a family of four has been in the vicinity of 50,000 to 60,000 won: around 35,000 for food and some 10,000 for other day-to-day necessities.

Next, North Korean residents pay at least 15,000 won for electricity and other utilities to the state.

Water and sewage and electricity cost, in total, around 1,000 won. Additionally, people have to give 30 percent of the earnings from their private fields every year. For a private field of around 40 pyeong (approximately 132m²), which is the general area for a single household, the farmer of the land has to pay around 3,000 won on average per month in usage fees, according to defectors.

In addition, if one adds other kinds of funding such as that for various kinds of local construction, military aid, fees for child education etc, the sum easily surpasses 10,000 won.

One defector, who arrived from Onsung in North Hamkyung Province in July of this year, said, “An elementary school in Onsung is instructing students to collect 10kg of apricot stones. If they cannot do that, the school forces them to give 5,000 won in cash. There are many cases of students who are unable to provide the apricot stones quitting school since they do not want to suffer under the burden.”

Another defector, who escaped from Hoiryeong in December last year, said, “Kim Ki Song First Middle School students had to pay 30,000 won every each three months for a school beautification project. However, many workers’ children were not able to tolerate that situation and quit.”

Another, who arrived in June from Hoiryeong, explained, “Even though the people were having to get food for themselves because of the absence of food distribution, the authorities took dogs, rabbits, leather or scrap from us all the time and, in addition, for the construction of a road, they pushed us to provide them with cement and bricks, so we had to offer all our income for several days.”

Besides all of this, the around 30 percent of people who do not have their own house have to pay at least 30,000 won in monthly rent.

Then, those who do businesses in the jangmadang have to pay between 300 and 2,000 won for each stall per day.

A defector, who did business in Chongjin until she defected in July last year, said, “The Provincial Committee of the Party took 300 won from each stall every day, and used 60,000 won of that for official expenses, gas for cars and entertainment for other cadres.”

Defectors say that the reason why the number of vagrants, so called kotjebi, has been increasing is also that they cannot afford to pay those fees.

Needless to say, while general people are weighed down by this heavy burden, high cadres in the Party, military or foreign currency earning bodies accumulate property through corruption, privilege, access to foreign currency earning businesses and the like, and enjoy their luxurious lives in high-class apartments in Pyongyang.

One defector who escaped from Pyongyang in February this year explained, “Since the currency redenomination, the preference for products rather than cash has been striking, so the price of apartments has risen a lot. In 2007, an apartment by the Daedong River was around $60,000, but now it is around $80,000 or $90,000.”

“While running errands, I visited one such apartment where high officials lived several times. It was amazing. They had foreign TVs, refrigerators and many other appliances. They used Korean or Japanese cosmetics and their shoes were all designer.”

A diplomat from the U.K. who visited Pyongyang in April, recently told the media that when he dropped by a fast food restaurant in Pyongyang most of the guests were students and some of them were wearing blue jeans and carrying cell phones.

The defector from Pyongyang criticized, “Newly built pizza or fast food restaurants in Pyongyang are like a playground for high officials’ children,” and concluded, “General local people are now struggling to feed this privileged class.”

The Daily NK conducted the interviews with defectors in this article with people who had just passed through the education course at Hanawon (the South Korean resettlement education center for North Korean defectors).

Read the full story here:
Tax Free North Korea Exists Only on Banners
Daily NK
Shin Joo Hyun
9/2/2010

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RoK traders with DPRK apply for government loans

Saturday, September 4th, 2010

According to Yonhap:

South Korean companies hampered by Seoul’s ban on their trade with North Korea have signed up for government loans amounting to 17.4 billion won (US$14.8 million), the unification ministry here said Saturday.

According to a ministry official, a total of 66 companies have asked to borrow government money on a 2 percent interest rate. The ministry began reviewing 155 applications on Aug. 2, the official added.

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Banned S. Korean traders with N. Korea apply for government loans
Yonhap
9/4/2010

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PRC tells DPRK its time for reform

Thursday, September 2nd, 2010

According to the Choson Ilbo:

Chinese President Hu Jintao told North Korean leader Kim Jong-il in strong terms to reform the North’s failed socialist economy and open up the country, a senior South Korean government official said Wednesday.

He made the call during a meeting when Kim visited China last week, using rather more direct terms than Chinese Premier Wen Jiabao had used during Kim’s last visit in May, according to the official. Wen told Kim, “I’d like to introduce to you China’s experience in the reform and opening drive.”

But the official quoted Hu as saying, “Socialist modernization is based on China’s three-decade-long experience in reform and opening. Although self-reliance is important, economic development is inseparable from external cooperation.”

According to a Chinese official, Kim too directly used the terms “reform and opening”  this time. He reportedly told Hu, “Since its launch of the reform and opening drive, China has achieved rapid development.”

Up until recently, top Chinese leaders had regarded the terms as taboo words at bilateral summits for fear of upsetting North Korea’s delicate feelings, but Wen first broke the taboo in May, and Hu in his advice to Kim even used language such as “enterprise,” “market mechanism” and “external cooperation.”

A diplomatic source in Beijing said China’s insistence on talking about reform shows how concerned China is with the North’s mismanagement of the economy.

China’s business media made upbeat observations about the North turning toward reform, quoting Kim as saying he was “deeply impressed” after touring major cities in China’s northeastern region such as Changchun, Harbin and Jilin.

In an editorial Tuesday, the Global Times, a sister newspaper of China’s official People’s Daily, wrote, “Living in the shadows of South Korea, Japan and the U.S., North Korea has to wrap itself up tighter in order to fend off military threats, and threats of political and cultural infiltration. North Korea’s opening-up will help relieve tensions in Northeast Asia. But, the knot does not only lie on the North’s side. Other countries in this region must redouble their efforts to untangle the knot.”

It is unclear whether Kim will listen. The North Korean leadership is afraid of any reform that could weaken its stranglehold, and at the moment tight control is essential if the regime is to officially establish Kim Jong-il’s son Jong-un as his father’s heir.

Kim has paid lip-service to the Chinese economic development model before. After returning from a trip in the early 2000s, he introduced some timid elements of the market economy but swiftly clamped down when markets became too brisk and a new class of successful businesspeople began to look like a threat to his regime.

Han Ki-bum, a former deputy director of the National Intelligence Service in charge of North Korean affairs, in his doctoral thesis quotes Kim as telling economic officials in June 2008, “If you think I’m talking about reform and opening as if I were going to introduce the market economy you’re completely mistaken.”

At the moment, Kim apparently wishes to stick it out, but the North’s dire straits amid international sanctions will make it difficult to ignore Chinese demands.

At the meeting, Hu pointed out that economic cooperation between the two countries would be a “win-win strategy” where “the government takes the initiative, enterprises play a leading role, and the market mechanism is set in motion,” according to the South Korean official.

“That means that if China gives the North something, it should also pay in return,” a South Korean security official speculated.

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Hu ‘Told Kim Jong-il It’s Time for Economic Reform’
Choson Ilbo
9/2/2010

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US offers flood aid to DPRK (2010)

Thursday, September 2nd, 2010

According to the Choson Ilbo:

The United States is offering $750,000 in emergency aid to North Korea to help aid recovery from devastating floods.

The U.S. Special Envoy for North Korea Human Rights, Robert King, told VOA Wednesday that the money will be given to three U.S. non-governmental organizations — Samaritan’s Purse, Global Resource Services, and Mercy Corps.

He said the organizations will use the money primarily for medical supplies and will fly the aid into Pyongyang beginning later this week.

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U.S. Offers Flood Aid to N.Korea
Choson Ilbo
9/2/2010

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